Editor's note: Finding winning names isn't always about investing in the headlines...

Sometimes, it's the companies working in the background that can provide the best returns. Stansberry Venture Technology editor Dave Lashmet capitalizes on this method in his newsletter by searching for emerging revolutions in small drug companies, medical-device makers, and new high-tech devices. These aren't trendy names, but they're the same kinds of opportunities that Laurance Rockefeller looked for.

In today's Masters Series, we're sharing a classic Dave essay – last featured in these pages in March 2024 – where Dave details the strategy you can use to invest and build your wealth just like a Rockefeller...

Invest Like a Rockefeller With These 'No Contest' Companies

By Dave Lashmet, editor, Stansberry Venture Technology

When most people hear "venture capital," they think of Silicon Valley...

They think of men in $5,000 suits trying to predict the next Apple or Facebook. But the concept of venture-capital investing goes back more than 75 years to one of America's blue-blood families.

Laurance Rockefeller, grandson of Standard Oil founder John D. Rockefeller Sr., developed the strategy to grow his family's wealth.

Rockefeller began his career in finance at 26, when he inherited his grandfather's seat on the New York Stock Exchange. During World War II, he became fascinated with incredible developments in science, technology, and medicine.

It shouldn't surprise you that the stocks I recommend in my biotech newsletter come from a few key sectors... And they look a lot like the emerging technologies Rockefeller focused on.

We use a few clues to find winning stocks in these areas. As you'll see, these traits amount to something important – a clear path to beating the competition.

Let me explain...

First of all, we focus on three main types of companies: small drug companies, medical-device makers, and technology.

We love developing pharmaceutical companies for several reasons. First, safe drugs save lives, so demand is inelastic. This means revenues go up even as prices rise.

Second, over the next 20 to 30 years, the older segment of our population is going to grow dramatically. The Baby Boomer generation will continue to spend a fortune on everything from pharmaceuticals to lifesaving devices.

Third, new drugs are protected monopolies. Patent-holders are guaranteed exclusive rights to sell a new drug for years before a generic version can hit the market and undercut profits.

That's important – because any competition has to undergo years of clinical trial testing. You can't build a new drug in your garage – not if you want approval from the U.S. Food and Drug Administration to sell it legally... So there are no surprises about new players coming into the field.

Medical devices are a similar story. Patents create economic monopolies for the companies selling these products. If you know what to look for, patents make it possible to read the competitive landscape.

When it comes to technology... we look for companies with breakthroughs that can be adopted readily by the market. In other words, consumers need them, and they're willing to pay a lot of money for them.

For example, imagine who the winners will be if the U.S. National Highway Traffic Safety Administration mandates lane-departure warnings, just like it did with seat belts or airbags. Or who will win if the Department of War wants more unmanned fighter drones.

To figure it out, one needs a deep understanding of the patent landscape. Patents (and related types of protection of intellectual property) are how we know a company's innovations are protected... and that the folks designing these breakthroughs will be the ones to bring them to market. That way, we can be more comfortable investing alongside them.

Patents are the bread and butter of successful biotech investing. Yet, Wall Street doesn't seem to understand their value because patents aren't a financial line item like cash on hand, or earnings before interest, taxes, depreciation, or amortization.

A patent is grounded in science, medicine, or engineering. Still, it's only valuable if it addresses a need – like a new machine to make smaller, faster computer chips, or a new antibiotic that fights infections...

One way or another, we want to secure our stake in the asset that a future market will desire. So we're doing more than just buying stocks in Stansberry Venture Technology. We're finding patents and learning about new technologies to know what will emerge next and how long a company will have a monopoly.

One sector you won't see us ranging into often is software. Here's why... Think about a smartphone application, like the ride-hail services of Uber or Lyft. Nothing holds back competition... so there's no guarantee who will win. Will Lyft beat Uber, or will Uber beat Lyft? Trying to guess is a fool's errand. For that matter, a third company might come along and wipe out both.

That's not true of safe new drugs, or devices, or core revolutions in hardware technology...

Although such technologies are much more expensive to develop, they are not fads. And their intellectual property is legally protected.

This is why some venture capitalists are now holding on to early-stage drugs... At least, they're trying to. But human clinical trials are expensive, and 95% of early-stage drugs ultimately fail, so small drug companies almost have to go public to share the risk.

We are happy with risk, as long as the reward is greater, and we have a reasonable chance to make far more money than we put at risk. So, we look for a 10-1 risk-to-reward ratio in every company we pick.

That's the core of what we do in my Venture Technology newsletter... We share a common understanding with early-stage venture capitalists. We give up some of the reward, but we also retire most of the risk... Plus, we stay more liquid.

This is how we find the best companies in emerging technologies – the kind that can soar to spectacular gains. And it's how you can learn to invest like a Rockefeller.

Good investing,

David Lashmet

Editor's note: Biotech isn't the only sector that Dave has found opportunities to invest in. He has found big winners in the aerospace and defense industries as well. And now, he says the next major trend is in the space-communications field. There's one crucial piece of technology that will drive the next "space race."

And regardless of what Elon Musk does with SpaceX, the company behind this tech is positioned to win. To learn more about this technology and why Dave compares it with the early stages of the Internet, click here.